1 Julai, 2012

Q & A – Fuel Subsidy


Question from Najib Razak’s Online Friend, Danny Fentom

The price of oil in Malaysia should not be in accordance with the world oil prices. We are producers and we should be the one to set the price of our oil, not follow global price. Only countries that do not produce oil and have to import oil use global oil prices. Is Malaysia a country that imports oil from other countries? If so, then what is the purpose of PETRONAS?

The fact is that even though we are an oil producing country, our domestic demand is nearly as much as the oil we export. We are therefore a marginal net exporter.

Secondly, we must realize that our oil is more suitable for the international market. For the type of petroleum products we use in our country, we need to process more suitable oil derived from countries such as the Middle East. We have to therefore import from these countries.

Apart from that, for every litre of petroleum products we produce, including LPG and diesel, the Government makes a significant contribution to the Rakyat of Malaysia through the amount of subsidy given of more than RM2 billion per month currently. RON95 for example, is being subsidised RM0.82 sen per litre. This means, if we pay RM1.90 per litre, we really should have been paying RM1.90 sen plus an additional RM0.82. And if we equate that to a full tank of about 25 litres, this means we will save between RM25 and RM30 every time we fill our tank full. This is the actual savings we gain that we sometimes don’t realise.

To add on, oil prices in Malaysia is among the lowest in the world. In Southeast Asia, our country has the lowest price apart from Brunei Darussalam. The Government has chosen a prudent policy and in addition we are not able to impose or give out subsidies that are too high because we want to use the wealth of our oil to contribute to the development of our economy.

If we use all our wealth to subsidize oil, it only increases our consumption. If we increase consumption, we are not building productive assets for the future of our country. Oil will definitely extinct one day, there will be lesser oil produced, and at that moment, we will be faced with a very tough situation. And this is why we must use our oil resources not only for the short-term interests but also for the long-term interests of our country. 

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